TD Bank fined more than $50 million for Ponzi cover-up

U.S. regulators have fined Toronto-Dominion (TD) Bank $52.5 million for covering up a massive Ponzi scheme that rocked southern Florida, according to reports. The fine is to settle regulatory charges that allege that the bank failed to properly report suspicious activity in accounts that were linked to a Ponzi scheme involving a Florida attorney, Scott Rothstein. Rothstein is now serving a 50-year prison term for his involvement in the scheme.

The Canadian lender’s TD Bank unit was fined some $37.5 million by the Financial Crimes Enforcement Network, which is also known as FinCEN, and the Office of the Comptroller of the Currency. It was fined an additional $15 million by the U.S. Securities and Exchange Commission (SEC).

According to regulators, from April 2008 to September 2009, TD Bank violated a federal law known as the Bank Secrecy Act by not uncovering and reporting suspicious activities in accounts belong to Rothstein’s law firm. The law firm is where he ran his $1.2 billion fraud scheme.

The SEC has brought separate civil charges against Frank Spinosa, a former TD Bank regional vice president. The charges were filed in U.S. District Court in Ft. Lauderdale, Fla. Through Spinosa, the bank allegedly “told outright lies to investors,” the case claims. It said that Spinosa alleged the bank had restricted the transfer of funds in Rothstein’s accounts while assuring the funds were safe, but in all actuality, that was not the case.

Spinosa denies the allegations made against him, and his attorney, Samuel Rabin, said in a statement that Spinosa is being “vilified” for the bank’s compliance incompetency and that his client is a “victim in this massive fraud.”

FinCEN said that it was not until after a 2011 review that TD Bank filed five reports that identified $900 million in suspicious activity that involved Rothstein. Based in Toronto, TD is Canada’s second largest bank. It has not admitted to or denied any wrongdoing. A spokeswoman for TD Bank said, “TD Bank is pleased to resolve these regulatory concerns and put the Rothstein matter behind us.”

In the meantime, Spinosa is preparing to fight the charges against him in court. His attorney has indicated he does not plan to agree to a plea arrangement, but instead, will dispute the charges he is facing.

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